WALL Street's main indexes were poised for a strong opening on Friday, with the Nasdaq taking the lead as megacap tech and chip stocks recovered from the week's pummeling and a largely in-line key inflation reading kept rate-cut bets intact.
Data showed the Personal Consumption Expenditures Price Index, the U.S. Federal Reserve's preferred inflation metric, rose 0.1% on a monthly basis in June and 2.5% annually, both as expected.
Core PCE, which excludes the volatile food and energy components, increased 0.2% monthly and 2.6% on an annual basis, both slightly above estimates.
The moderate rise in U.S. prices underscored an improving inflation environment, potentially positioning the Fed to begin easing policy in September.
"You've got a pretty nice (inflation) report here that further emboldens the soft landing narrative," said Rick Meckler, partner at Cherry Lane Investments.
Bets of a 25-basis-point cut by the Fed's September meeting edged up to 91.5%, from 88% before the data, according to CME's FedWatch. Traders largely expect around two rate cuts by December, according to LSEG data.
All the so-called Magnificent Seven stocks - Apple, Nvidia, Alphabet, Microsoft, Meta Platforms, Amazon.com and Tesla - were up between 0.6% and 3.5% in premarket trading.
The 10-year Treasury yield turned lower after the PCE data.
Chip stocks also rebounded, with Intel, Broadcom, Qualcomm, Micron Technology and Arm Holdings up between 1.4% and 3.4%.
At 8:48 a.m. ET, Dow e-minis were up 219 points, or 0.54%, S&P 500 e-minis were up 38.75 points, or 0.71%, and Nasdaq 100 e-minis were up 177 points, or 0.93%.
Investors have dumped tech stocks over the past few weeks, with disappointing earnings from Alphabet and Tesla sparking a sharp sell-off in megacap and artificial-intelligence-linked shares on Wednesday. The S&P 500 and the Nasdaq were on track for a second straight weekly decline if losses hold.
"While it's been a rough week for the S&P and the Nasdaq, the rotation in the small caps and cyclicals has continued to have a much better week," Meckler said.
Concerns about Wall Street's growing dependence on a set of high-momentum stocks, whose valuations now appear inflated, have made underperforming sectors like mid- and small-cap stocks seem more attractive on the prospect of early rate cuts.
Futures tracking the Russell 2000 jumped 1.2% on the day, with the small-cap index set for its third straight week of gains if trends hold.
Data released earlier this week showed faster-than-expected second-quarter economic growth and subsiding inflationary pressures, keeping hopes of a September rate cut alive and boosting the blue-chip Dow and the small-cap Russell 2000.
Deckers Outdoor jumped 13.1% after raising its annual profit forecast, while Oilfield services firm Baker Hughes climbed 3.1% after beating estimates for second-quarter profit.
Medical device maker Dexcom slumped 38.3% after cutting its annual revenue forecast. - Reuters
